📘 What is Inventory Turnover?

Inventory turnover in real estate refers to how often the available housing stock in a specific market is sold and replaced over a certain period, typically one year. It’s a key indicator of market activity, demand, and the overall pace of real estate transactions.

A higher turnover rate suggests a hot market with strong buyer demand, while a lower rate can indicate slower movement or an oversupply of listings.

📌 When and Why It’s Used

Real estate investors and analysts use inventory turnover to evaluate local market competitiveness, time property purchases, or assess the health of a region's housing demand. Fast-moving markets can indicate rising prices, while sluggish turnover can suggest negotiating opportunities or saturation.

It’s especially useful for developers, flippers, and buy-and-hold investors deciding where to focus their resources.

🧮 How It’s Calculated or Applied

Inventory turnover is calculated by dividing the number of homes sold in a given period by the average number of active listings during the same time. This gives a sense of how quickly listings are being absorbed by the market.

A turnover ratio greater than 1 indicates that listings are selling faster than they’re being replenished.

✅ Pros

• Helps identify high-demand markets and ideal timing for investment
• Indicates pricing power—faster turnover often leads to increased home values
• Useful for comparing neighborhood or city-level performance

⚠️ Cons

• Doesn’t account for pricing trends or market affordability
• May vary seasonally and be misleading without broader context
• Low turnover might signal opportunity—but also risk or stagnation